Contingent Valuation Method

1
Contingent Valuation Method

• David Letson
• University of Miami

2
Main Points

• Structure of CV interview
• Advantages, disadvantages
• Policy context
• When should CV be used?

3
Introduction

• Surveys elicit WTP for public goods.
• Values contingent on hypothetical market.

4
Survey interviews three parts

• Description of good and circumstances.
• plausibility
• provision levels
• substitutes
• payment vehicle
• Questions about WTP.
• Other info about respondent.

5
Lake Powell, Utah

• Situation A no power plant.
• Situation B plant visible from Lake but smoke is
  not.
• Situation C plant and smoke both visible.
• Payment vehicle is hypothetical entrance fee.

6
Sampling Issues

• Representative of population.
• Design of survey instrument.
• Significant response rate.
• Incomplete responses.

7
Advantages of CV

• Flexible.
• Maybe only applicable method.
• Directness.
• Existence values.

8
Disadvantages

• External validation
• Embedding
• Payment vehicle.
• Protest bids.
• Extent of market issues.

9
Policy Context

• CERCLA (or Superfund)
• Hazardous waste.
• Establishes cleanup responsibility.
• Govt agencies as trustees.
• Lost non-use values are recoverable.
• Oil Pollution Act of 1990
• Provides for damage recovery.

10
Benefits of CWA

• How to describe the good.
• Long interviews
• visual aid
• the water quality ladder.
• from below boatable to boatable
• from boatable to fishable and
• from fishable to swimmable.
• Higher taxes and product prices.
• Benefits versus costs.

11
Galveston Bay Water Quality Management Plan

• Worth of proposed mgt plan to residents.
• Uncertain economic/ecological systems.
• How reliability are mail surveys?
• How useful are visual aids?
• Disproportionate sample.

12
Galveston WTP Question

• Given your current monthly income, if the plan
  cost your household X per month for five years
  as a surcharge to your water bill
• I would vote for it.
• I would vote against it.
• Im not sure.

13
When to Use CV?

• Important advantages.
• Reactions to hypothetical events.
• NOAA panel.
• Damage assessment law suits.